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Millions wasted in chaotic power plays

Larry Graham

When I wrote last week’s column about the how the privatization of the electricity market in Victoria had resulted in more choice and lower prices for consumers, I had no idea that the WA Government was in such turmoil over energy issues.

The departure of board members of the newly merged and government-owned electricity utility further highlights the differences between public and private systems.

Can anyone imagine behavior like that being tolerated in a listed company? Surely if it is good enough for the stock exchange to demand continual disclosure from office bearers it should not be a step too far for a taxpayer-funded business to do the same.

This critical issue for WA is now essentially an ideological spat between the Minister for Energy and the Premier, and it is the best indicator so far that neither of their cunning plans is any good.

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The Premier favours the retention of the newly-merged electrical entities in government hands and the Minister has invented some strange beast that is neither fish nor fowl.

As best as I can determine his solution is for two generating retailers - known as gentailers - and these, I presume, will be privatised. If they are not, I don’t understand what the fight is about.

Those folks who were comfortable with and pine for the good old days of state-owned State Electricity Commission (SEC) are not going to find much gratification with anything that is happening at the moment.

One of the causes of our current problem was the splitting of the old corporatized SEC, aka Western Power, into separate identities of Synergy, Verve, Western and Horizon Power.

Publicly this was touted as the move that would drive the efficiencies, reduce costs and subsequently hold down electricity prices. Privately the reasoning was that it avoided dealing with the prickly privatisation issue.

On every point, except not allowing privatisation, not only did this demerger fail - it cost millions of dollars to implement.

The latest marriage of inconvenience between Synergy and Verve was also supposed to reduce costs and lower electricity prices. This step was also taken to avoid dealing with privatization and will have precisely the same result as its predecessor – it will fail.

That is because the remerging of the two utilities was not driven by good public policy, it was spearheaded by petulance and pigheadedness - and there are very few in the industry who think the step will achieve any meaningful result.

It will also cost millions of dollars.

Energy reform in this state has degenerated (no pun intended) into a spat between two powerful members of the government, both of whom once held key positions in organisations that lectured us all on the virtues of competition and private enterprise as the two key levers that drive the State’s economy.

I have said in earlier columns, and it is worth repeating, that if they were correct then they are both wrong now - but the tragedy is that they were correct back then.

Even if one disagrees with privatisation, I dare anyone to explain how the current debacle helps to drive efficiencies and put competitive pressure on prices.

It just cannot do it.

The elephant in the room is that if we did actually have an electricity market in WA, the current oversupply of generating capacity would be driving prices down.

But in defiance of the simple market rule of supply up, prices down and vice versa, the government-controlled electricity prices still rise.

In addition to forcing consumers to pay higher prices, successive governments have poured hundreds of millions of dollars down the drain trying to avoid dealing with privatisation.

To date this has produced public chaos, rising prices and dysfunction at every level of public administration.

Why they find it so hard is beyond me. Privatisation of generation is neither new nor brave, and it does not lead to higher prices.

Have none of the decision makers noticed that most of the Pilbara has been running on private power for 40 years?

It seems to be doing OK.

Because it can choose who to buy from, business in the south is alright, but there must come a time when consumers who cannot choose say enough is enough.

Not only are their electricity bills higher than they should be, but they are also contributing the hundreds of millions of dollars that weak governments are spending on an almost continual restructuring of their ailing businesses.

I am certain that the Government will not remain in the electricity generation business, and the only real question is when they decide to get out.

PS: Dr Nahan – if you want someone on the board who will shift the privatization along - call me.